Friday, October 5, 2007

110,000 Jobs Added to Economy Last MonthPayrolls Pick Up by 110,000 but Not Enough to Stop Jobless Rate From Rising to 4.7 Percent

WASHINGTON (AP) -- Job creation picked up in September but not enough to stop the unemployment rate from rising to 4.7 percent, the highest in just over a year.

The new job market snapshot released by the Labor Department on Friday showed that employers boosted payrolls by 110,000, the most in one month since last May. In an encouraging note, the economy actually added 89,000 jobs in August. That marked an improvement from the net loss of 4,000 that the government first estimated.

The bump up in the unemployment rate from 4.6 percent in August came as hundreds of thousands of people streamed back into the labor market. That new rate of 4.7 percent was the highest since the summer of 2006.

Wages, meanwhile, rose solidly.

Altogether, the report suggests that although the job market has softened, it hasn't been hit nearly as hard by a credit crunch and a housing slump as thought was the case just a month ago.

To be sure, the ill effects of these problems are showing up at some companies. Construction firms cut 14,000 jobs in September, Factories slashed 18,000. Retailers got rid of just over 5,000 jobs. Financial services companies eliminated 14,000 slots.

However, gains in education and health services, professional services, leisure and hospitality, and in government work more than offset those losses, leading to a net gain in new jobs in September.

Ken Mayland, president of ClearView Economics, said the new employment report should allay fears that the economy may be heading for a recession.

The August report, which originally showed the first loss of jobs in four years, stoked fears that the economy was heading down that path. The revised payroll figure for August mostly reflected a big gain in government employment, especially in hiring teachers at local schools.

"There is still a certain amount of caution on the part of companies' human resources departments. The economy is still in slowdown mode and not fully back to health. But it is not in the intensive care unit," Mayland said.

The tally of new jobs was better than the 100,000 positions that economists were forecasting would be added to payrolls. They did correctly predict that the jobless rate would rise to 4.7 percent.

Still, the worst housing slump in 16 years and a jarring credit crunch have intensified uncertainty about the economy's outlook as well as companies' own financial positions.

To cushion the economy and bolster confidence, Federal Reserve Chairman Ben Bernanke and his colleagues last month sliced a key interest rate by one-half percentage point to 4.75 percent. It was the first rate cut in more than four years.

Policymakers hope the rate reduction will make businesses and people more inclined to spend and invest, which would help energize overall economic activity.

The latest report of employment conditions across the country comes as President Bush watches his approval-ratings tank. A record-low 34 percent approved of his handling of the economy in October, according to an Associated Press-Ipsos poll. Bush scheduled a statement on the latest jobs report from the White House later Friday morning.

Those with jobs saw gains last month.

Average hourly earnings rose to $17.57 in September, a 0.4 percent increase from August. Economists were forecasting a 0.3 percent increase. Over the past 12 months, wages are up 4.1 percent. That was the highest annual gain since since February.

Wage growth supports consumer spending, a major contributor to national economic growth. A rapid and prolonged pickup in wages, however, can spur inflation concerns. On the other hand, if the job market were to falter, wage growth would be crimped. That would lessen people's appetite to spend, spelling trouble for the economy.

Economic growth, which clocked in at a brisk 3.8 percent pace in the spring, is believed to have slowed to a pace of around 2.4 percent or less in the just ended July-to-September quarter. Some believe that growth will be weaker in the final three months of this year.

The unemployment rate is expected to climb to close to 5 percent by the end of the year -- but that's a figure that is relatively low by historical standards. During the deep recession of the early 1980s, for instance, the civilian unemployment rate topped 10 percent at several intervals.

A meltdown in the housing and mortgage markets this year has clobbered some homeowners, driving foreclosures to record-high levels. Lenders have been forced out of buiness. And, investors in mortgage-backed securities have taken huge losses. A spreading credit crunch took a turn for the worse in August, unhinging Wall Street. There have been some signs that the financial turmoil has calmed down, although the situation remains delicate.